70% Rule

[John Curseaden]

When, if ever, do you depart from the 70% rule in making your max offer on a property?

[Andrew Massaro]

@Account Closed

If the house you're looking at is a rental, then you can go higher than 70%, or whatever your rule of thumb is. For example, if the avg home value in your area is $150k, but the ARV on this house is $70k, there is a good chance in it's an area dominated by rentals. If you can deliver a landlord an investment that will earn him a 20% annual ROI, he'll jump on it, even if there is little, to no, equity. Where else is he going to get a return on his investment like that?

If I were a landlord, I'd pay upwards of 90% of ARV... if the CAP Rate and Rate of Return were 15% or higher.